The UK private rental market is under growing strain as buy-to-let landlords retreat in response to higher taxes, interest costs and regulatory obligations introduced in the latest Autumn Budget and wider government policy changes. Long-standing investors and new entrants alike are reassessing the viability of property investment amid a two-percentage-point rise in tax on rental income set for April 2027, tighter energy-efficiency requirements and a raft of compliance duties that have eroded returns.
Buy-to-let was once a cornerstone of the UK’s residential property supply, but successive fiscal adjustments and market headwinds have reduced its appeal. Tax rises announced last November increased the tax rate on rental profits for basic-rate taxpayers to 22 per cent, with higher bands rising to 42 per cent and 47 per cent, prompting some landlords to increase rents to preserve margins or exit the sector altogether. Many also face mounting costs to meet energy performance requirements, with properties needing minimum performance ratings by 2030 that could require significant capital expenditure.
Data from agency research shows that the proportion of homes bought by private landlords has declined to its lowest level since before the 2007 financial crisis, reflecting a tightening supply of rental stock. One estimate suggests that roughly 200 000 properties were withdrawn from the private rental market in the year to March 2025, while interest-only mortgage arrangements, still held by many landlords, have become less tenable as higher borrowing costs squeeze cash-flow.
Government officials have defended the policy stance, linking tax and regulatory measures to broader housing-market and social goals such as making homeownership more accessible for first-time buyers. These buyers accounted for a record share of purchases in 2025 as investor competition eased, a shift welcomed by housing advocates but viewed with concern by landlord groups wary of concentration risk in rental provision.
Institutional investors are moving into alternatives such as “build-to-rent” developments, but this segment remains small relative to the traditional private rental market. The contraction in landlords has sparked warnings from the Office for Budget Responsibility and housing analysts that reduced supply could, over time, contribute to upward pressure on rents and exacerbate affordability issues if housing construction does not keep pace with demand.
